Apple share price under pressure on iPhone 5 orders

There is no doubt that Apple has lost market share. It was inevitable. When you have those kinds of margins as first movers in the high end smartphone market, it is standard economics 101 that competitors will see those abnormal returns and try and get their piece of the pie. Samsung have been worthy competitors responsible for 31.3% of shipments in the third quarter of 2012 compared to Apple's 14.6%. For Apple however it was never about market share of shipments, it was market share of profits of which they pulled in over 60% at the end of last year.


Of course as shipments market share decreases so will the share of profits and this is why investors have been concerned. On top of this The WSJ released an article yesterday which suggested that orders for components for the iPhone 5 have been cut due to weaker demand. Here is the article titled Apple Cuts Orders for iPhone Parts.


It is one of those articles that quotes "people close to the matter" which I always take with a pinch of salt but The WSJ is a credible publication and this kind of information is bad news. I'm not too worried about market share because firstly, the smartphone market is growing very fast so even if you are losing market share, you can still be growing nicely and secondly Apple's exclusivity has allowed it to maintain growing profits. But this is bad news because if Apple are missing their own forecasts, it really does throw a spanner in the works.


Even if this article speaks the truth I am still adamant Apple is a great investment at these levels. Their brand is still a huge pull and there are talks that a cheaper iPhone is being made in order to get hold of people who love Apple but cannot afford the phones, especially in the developing world. I am all for this because even if they sacrifice margins, they could introduce millions of people to the Apple world which includes massive content consumption and an immediate incentive to integrate iPads and Mac Books. Once you are in the Apple world, it is hard to get out.


I know we are far behind here in South Africa but since iTunes has been introduced here, I am even more sucked in as a client. Music is a global language which everyone loves and will never go out of fashion. iTunes alone is the 12th biggest tech company in the world and as that platform grows it will work hand in hand with the hardware. I feel content will be become more and more significant for Apple in the future.


Back to the hardware, I have read great reviews on the iPad mini and apparently it is flying off the shelves. I have spoken before about the fundamentals behind the share price and how cheap it is looking. We continue to use this weakness to add to the stock and wait in anticipation for results on the 23rd of January where we will get much needed clarity on this latest quarter.